A Gram-negative bacterial strain designated LS2 isolated from Lahaul-Spiti valley of North India was shown to produce pink pigment while utilizing methanol as sole source of carbon and energy. Interestingly, pigment production was inducible in nature since the organism did not produce any pigment when grown on other carbon sources. Based on phenotypic and phylogenetic characterization the non-pigmented methylotroph was identified as a novel strain of Acinetobacter lwoffii MTCC 8288 (DQ144736). By means of spectral and mass analyses the pigment was characterized as bacterioruberin-like carotenoid molecule. Here, the carotenoid pigment may form an important part of the antioxidant defense mechanism against oxidative stress imparted by methanol. The methanol utilization pathway in strain LS2 was deciphered by showing the presence of functional methanol dehydrogenase and formaldehyde dehydrogenase genes. In addition, to investigate methanol induced physiological changes, comparative fatty acid profile was analysed and distinctive qualitative as well as quantitative differences in fatty acid content were observed. Therefore, we suggest that strain LS2 exhibiting such unique phenotypic property should be assigned a taxonomic position other than the pigmented and non-pigmented methylotrophs.